As we all know, it’s the job of recovery auditors to identify, collect, and correct improper payments. Along the way, they naturally uncover patterns of error, and, effective July 1, 2012, the Centers for Medicare & Medicaid Services (CMS) will develop and install edits to correct “significant” improper payments in six areas. The edits will “act as tools to protect the Medicare Trust Fund,” CMS states in transmittal 1051 (issued February 29), which can be downloaded at


The claims on which the recovery auditors found improper payments cover the gamut of healthcare providers, including physicians, hospitals, inpatient psychiatric facilities (IPFs), skilled nursing facilities (SNFs), and durable medical equipment (DME) providers. Key points of each area are provided below along with brief highlights of related policies.


Incorrect Place of Service (POS)


Incorrect POS codes continue to appear as a problem area and so it is no surprise that edits will need to be installed to identify these. RACs reported a high potential for error when services are performed in a facility but billed by the physician using a non-facility POS code.


Policy: The Medicare physician fee schedule (MPFS) includes two payment amounts depending on whether a service is performed in a facility or a non-facility setting such as a physician’s office. Higher payments are associated with services provided in the non-facility setting as listed in section 414.22(b)(5)(i)(B) in the Code of Federal Regulations, Title 42.


As stated in the CFR, “The higher non-facility practice expense RVUs apply to services performed in a physician’s office, a patient’s home, an ASC [ambulatory surgical center] if the physician is performing a procedure not on the ASC approved procedures list, a nursing facility, or a facility or institution other than a hospital or skilled nursing facility, community mental health center, or ASC performing an ASC approved procedure.”


Global Surgery Period


A 2007 audit by the Department of Health & Human Services Office of Inspector General (OIG) revealed that a high majority of physicians (79 out of 100) billed separately for visits that were actually included in, and paid as part of, the global surgery period.  Components of the global surgical package include evaluation and management (E&M) services and visits, and RACs found that visits were being billed separately.


Policy: As stated in the Medicare Claims Processing Manual, Chapter 12, Physicians/Non-Physician Practitioners, Section 40.3.B, “preoperative visits after the decision is made to operate beginning with the day before the day of surgery for major procedures and the day of surgery for minor procedures and follow-up visits during the postoperative period of the surgery that are related to recovery from the surgery are included components of the global surgical package and are not separately payable.”


Post-Acute-Care Transfers


RACs have uncovered that hospitals continue to bill improperly for these transfers, and, consequently, both the transferring and receiving hospital are receiving the full DRG payment. Edits will be established to ensure compliance with the following policy (found in the MCPM, Chapter 3, Section 40.2.4).


Policy: When a Medicare beneficiary is transferred from one acute inpatient hospital to another or from an acute inpatient hospital to a hospital or unit excluded from the inpatient prospective payment system (PPS) for certain DRGs, the transferring hospital is paid a per-diem rate up to the full DRG payment and the receiving facility is paid the full DRG payment. The transferring hospital is paid the full DRG payment if the length of stay is equal to or greater than the geometric mean length of stay (GLOS) for the DRG.


SNFs and DME


As in many sites of service, RACs have uncovered unbundling issues in SNFs, particularly related to contracted services-such and physical, occupational, and speech therapy-and/or DME suppliers. Edits will be installed to ensure compliance with the policies below.


Policy: Payment for most of the services provided to beneficiaries in a Medicare-covered Part A SNF stay are included in a bundled prospective payment made to the facilities. The SNF is supposed to submit a consolidated bill (CB) for these bundled services, including those furnished under arrangements with an outside supplier. Under the CB requirement, the SNF must submit all Medicare claims for all the services that its residents receive under Part A, except for certain excluded services (described in §§20.1 – 20.3) and for all physical, occupational and speech-language pathology services received by residents under Part B.


When DME is furnished for use in a SNF during a covered Part A stay, the DME regional carriers (DMERCs) are not supposed to make a separate payment because the DME is already included in the payment that the SNF receives for the covered stay itself.



IPF Services


In these facilities, RACs have identified overpayments being made even though incorrect source of admission codes are listed on claims.


Policy: Under the PPS for IPFs, an additional payment is made for the first day of the Medicare beneficiary’s stay to account for the emergency department (ED) costs if the IPF has a qualifying ED. This payment is not made to the IPF if the beneficiary was discharged from the acute care section of a hospital to its own hospital-based IPF because the ED services are covered by the Medicare payment made to the hospital for the inpatient stay.  Source of admission code ‘D’ has been designed to be used to prevent the additional payment to the IPF for these transfer claims.


Untimed Codes


Improper payments to providers related to untimed codes continue to be identified by RACs.  In transmittal 1051, CMS provides numerous examples of these codes from the medicine section of CPT. The agency will create edits that denies these codes when they are billed more than once per day without appropriate modifiers.


Policy: When reporting service units for HCPCS codes where the procedure is not defined by a specific timeframe (i.e., untimed), the provider enters “1” in the field labeled units. For untimed codes, units are reported based on the number of times (often once per day) the procedure is performed, as described in the HCPCS code definition.


About the Author


Sandra Routhier is a senior healthcare consultant with Panacea Healthcare Solutions Company, Inc., St. Paul, MN. Sandy has more than 25 years of professional experience in health information management, revenue cycle, utilization management and information systems.


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